Securities class action lawsuit filings continued to accumulate during the third quarter of 2011, and the filing levels remain on pace for an above average year of securities class action litigation. As was the case in earlier quarters this year, the third quarter filing level was significantly buoyed by merger-related litigation and by lawsuits involving U.S.-listed Chinese companies, although to a lesser extent than prior quarters. There are some other interesting trends emerging as well. By my count, there were 49 new securities class action lawsuits filed in the third quarter of 2011, bringing the year to date total through September 30 to 154. (Please see below for some note about "counting "and the reasons my count may differ from other published tallies.) The third quarter filing levels held steady with the number in the second quarter of 2011, when 49 lawsuits were also filed. The 154 filings year to date implies an annual filing total of about 205, which would be above the 1997-2009 average of 195. The two most significant factors in the securities lawsuit filings during the first nine months of the year are merger-related lawsuits and lawsuits involving U.S.-listed Chinese companies. Of the 154 federal securities lawsuits filed through September 30, 47 (30.51%) were merger-related. Non-U.S. companies were named as defendants in 43 of the securities lawsuits (27.9%) filed during the first three quarters, of which 32 involved U.S. listed Chinese companies (20.79%). Though the merger-related filings and lawsuits against U.S.-listed Chinese companies both continued to accumulate in the third quarter, both trends were diminished in the third quarter compared to the year's first half. During the third quarter, 11 of the 49 lawsuit filings (22.54%) were merger-related, and 6 of the 49 filings (12.24%) involved U.S.-listed Chinese companies, both figures down compared to the year to date as a whole. The 154 YTD lawsuit filings involve a surprising diversity of companies. The companies named as defendants in the securities lawsuit filings during the year's first nine months represented 91 different Standard Industrial Classification codes (SIC). Unlike recent years, in which filings against financially-related companies predominated, the SIC code categories with the largest number of filings during the first three quarters of 2011 reflect industries that historically have been the focus of securities litigation. Thus, the SIC code categories with the largest number of securities lawsuit filings so far this year are SIC code categoies 3674 (Semiconductor and Related Devices) and 7372 (Prepackaged Software). The next largest SIC code category includes one industrial group that has also been a frequent target in the past, SIC Code category 2834 (Pharmaceutical Preparations), in which six companies have been sued year to date. Another category that has also had six new filings so far this year is a group that in the past has not seen the same level of litigation activity, SIC Code category 1311 (Crude Petroleum and Natural Gas). The federal securities class action lawsuits during 2011's first nine months have been filed in 45 different federal district courts, but just two courts have accounted for more than half of the filings. During the first three quarters of the year, there were 33 new securities class action lawsuit filing in the Southern District of New York, and 29 in the Central District of California. Both of these figures were significantly increased by filings involving U.S.-listed Chinese companies. In the Southern District of New York, 21 of the 33 filings through September 30 involved non-U.S. companies, of which 13 were U.S.-listed Chinese companies. In the Central District of California, 13 of the 29 lawsuits filed during the first nine months of the year involved U.S.-listed Chinese companies. In the overall category of corporate and securities litigation, including litigation filed in state courts, the merger-related litigation has been and remains the predominant story. By my count, during the first three quarters, there was merger objection litigation filed involving at least 129 transactions, and accounting for at least 185 different lawsuits (counting lawsuits filed in both federal and state court). These figures only take account of the lawsuits of which I am aware and are almost certainly understated. In other words, if you are attempting to track corporate and securities litigation and you are only monitoring federal securities class action litigation, you are missing a great deal of the action. In fact, you could be missing the majority of the action. As I noted at the outset, my lawsuit count may differ from other published accounts for a number of reasons. First, I include in my count class action lawsuits asserting violation of the federal securities laws but that are filed in state court. There were at least two of these during the third quarter of 2011. In addition, I may not always decide to include the same merger-objection lawsuits in my tally as do other sources that track securities lawsuit filings. I include the merger-related lawsuit if it is in federal court and if it alleges a violation of the federal securities laws. The decision to include the above described categories of cases and other factors will likely cause my count to be slightly higher than other published tallies. I think the tallies will remain directionally consistent but the differences might be enough to lead to differences of opinion about, for example, whether or not the number of annual filings is increasing or declining, or how the annual filing levels compare with annual averages. The Towers Watson 2011 D&O Insurance Survey Form Released: Towers Watson has released the 2011 survey form for its annual survey of D&O insurance buying patterns. Everyone in the industry benefits from Towers Watson's annual survey, the summary report for which Tower Watson makes freely available. Because everyone benefits from it, we all have a stake in making sure that there are sufficient responses to ensure that the survey results are meaningful. I hope everyone will take the time to ensure that as many D&O insurance buyers as possible will complete the survey. The survey can be found here.
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